Goldbugs and the Federal Reserve: Down But Not Out

By Brendan Conway

With a few hours to go until this afternoon’s Federal Open Market Committee statement, the most popular gold fund is down nearly 1%. Maybe not for long. If traders’ search for monetary stimulus isn’t sated this week, the search may simply shift to September.

Besides the FOMC today, we’ve also got a European Central Bank meeting tomorrow. Either one could result in the action traders have been seeking Markets have calmed of late largely because the ECB’s Mario Draghi pledged to do “whatever” is necessary to save the euro. In addition, the WSJ’s Jon Hilsenrath has pointed to signs of fresh quantitative easing efforts at the Fed.

But even if it doesn’t happen, it won’t end the argument. ”[A]ny subsequent gold price decline would be relatively short-lived, as the bullion market may anticipate additional easing at the FOMC’s September meeting,” HSBC analyst James Steel tells Dow Jones Newswires. “Thus, we believe that the recent gold bull move may beblunted but not reversed.”

The SPDR Gold Trust (GLD) is down 0.9% and gold futures are off 0.7%. The iShares Gold Trust (IAU) is down 1% in morning trading.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.